Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Re: Got some free time? Help me build a budget for
Old 08-26-2006, 02:42 PM   #61
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Re: Got some free time? Help me build a budget for

Quote:
Originally Posted by jclarksnakes
,,,,After reading all the posts on this thread I have a couple of opinons to voice.
1. The 3X rule of thumb the bankers are touting is evil. A little house with a stay at home mom or dad is likely to provide a much happier childhood than childcare and a Mcmansion.
Probably. I bet the childhood quality has more to do with the stay-at-home parent.

Quote:
Originally Posted by jclarksnakes
2. 30 year mortgages are just dumb. 15 year mortgages are okay.
I'd hold my opinion until I did the math, and then I'd decide if I could sleep at night. In our case a 30-year mortgage at 5.375%, which won't be paid off until 2034 when I'm 74, is working out quite well. FIRECalc says there's nearly a 70% chance of making money on it in the stock market (heck, we can practically do that with CDs now) and our ER portfolio is more survivable with the added padding from investing the mortgage money. But you have to be able to sleep at night.

15-year loans might not last longer than a sidways stock market. 20 years would be a safer bet.
Quote:
Originally Posted by jclarksnakes
3. Car loans are dumb. Car loans longer than 36 months are insanely stupid. Most car leases are somewhere between these two but leaning more towards insanely stupid.
I think car loans & leases make sense for businesses but not for individuals.

However getting a cheap car loan and investing the cash can save some money off the purchase price of a new car. It's probably still more expensive than buying a used car, but some buyers feel more comfortable with a new vehicle.

Quote:
Originally Posted by jclarksnakes
4. Buying any car other than a Toyota or Honda is a financial mistake.
If those companies made a fuel-efficient station wagon that could haul a 4'x8' sheet of building material, or a dishwasher or a washing machine, then I'd be more interested. When I rent a U-Haul for larger loads I'm usually paying $75-$100 for the experience. Maybe next time around we'll look at a Civic or Camry station wagon, but people seem to hang on to them forever.
__________________

__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Got some free time? Help me build a budget for
Old 08-26-2006, 06:41 PM   #62
Recycles dryer sheets
 
Join Date: May 2006
Posts: 442
Re: Got some free time? Help me build a budget for

Quote:
Originally Posted by Sam
Thanks for the info.* $350 for 2 cars insurance is very low.* Which company do you use?* You did not mention repair, so I assume 375 is for both maintenance and repair, right?* Sounds like you work on your cars as well (I do too, whenever I can.)
We are insured by PEMCO. We also have our homeowners and a 1M umbrella policy with them. Insurance costs really adds up fast. I think most people over insure. We try to keep it simple & are willing to take some of the risk. For our cars try to buy only Honda, Toyota or Subaru, so they won't break down so much. I take our cars to the dealer while the warranty is in place, and after that I take over the general maintenance. I must confess… I am getting tired of crawling under the car.
__________________

__________________
dmpi is offline   Reply With Quote
Re: Got some free time? Help me build a budget for
Old 08-26-2006, 08:17 PM   #63
Thinks s/he gets paid by the post
 
Join Date: Mar 2006
Location: Houston
Posts: 2,155
Re: Got some free time? Help me build a budget for

Quote:
Originally Posted by dmpi
When we FIRE ( around 10 years from now) might get rid of a car.
Geez!* From a financial point of view, I'm sure you don't have to wait that long.* From the same point of view, I don't think you need to get rid of the second car either.

__________________
Sam is offline   Reply With Quote
Re: Got some free time? Help me build a budget for
Old 08-26-2006, 08:31 PM   #64
Thinks s/he gets paid by the post
 
Join Date: Mar 2006
Location: Houston
Posts: 2,155
Re: Got some free time? Help me build a budget for

Quote:
Originally Posted by Scrooge
A Camry if I estimate that I have a good chance of getting in an accident (depends on the area), a Corolla otherwise.
I suggest the biggest car Toyota has at that time.* The last thing you want to do is hurt yourself in an accident.* Who's going be spending all that saving*


18 years ago, when I decided that living paycheck by paycheck is wrong, I came up with a set of rules to live by:

Never buy a house that costs more than 3 times annual income.
Never buy a car that cost more than one third (33%) of annual income.
Save at least 15% of annual income.

I have stuck to those rules, and exceeded them.* My most expensive home is 1.7x.* My most expensive car is 30%.* On the average, I save close to 20%.* Man, I was so proud of myself, until... now.*

Just kidding.* I admire you and dmpi, but honestly, I know I cannot do it even if I'm giving the chance again.
__________________
Sam is offline   Reply With Quote
Re: Got some free time? Help me build a budget for
Old 08-27-2006, 02:51 PM   #65
Full time employment: Posting here.
Helena's Avatar
 
Join Date: Aug 2006
Posts: 601
Re: Got some free time? Help me build a budget for

As someone who was raised to be thrifty and frugal
and a current Dave Ramsey groupie 8) [ see link below ]
I would be very careful to make sure I have paid off any
credit card and auto debt... and have at least 6 months
of living expenses in reserve... before even considering
buying a home.


http://www.daveramsey.com/



*

__________________
Helena is offline   Reply With Quote
Re: Got some free time? Help me build a budget for
Old 08-27-2006, 03:51 PM   #66
Recycles dryer sheets
 
Join Date: Jun 2006
Posts: 473
Re: Got some free time? Help me build a budget for

Quote:
Originally Posted by Sam
I suggest the biggest car Toyota has at that time.* The last thing you want to do is hurt yourself in an accident.* Who's going be spending all that saving*
I am afraid one million dollars, even after taxes, is not that much money any more. I'll have enough to live on, but nothing extravagant. Granted, safety is a priority, but so are reliability and the total cost of ownership. It's always a compromise.

Quote:
Just kidding.* I admire you and dmpi, but honestly, I know I cannot do it even if I'm giving the chance again.
Well, again, you have to compromise. Your priorities will determine where exactly you draw that line, but as long as it is rational and you are willing to live with the consequences, it's all good.

I am not worried about people who sit down, do the math and then decide to save 5%, 10%, 20% or 50% of their income. Whatever floats their boat, as it were. I am worried about my coworkers, who are spending all of their money and don't even know where it is going.

As I mentioned earlier, the IT area that I work in is slowly going the way of the dinosaurs and my coworkers are even more vulnerably than me since their skill set is of very limited applicability. When the current slew of contracts is gone and they are no longer needed -- and the writing on the wall is visible even from here -- they will find themsleves in a very unpleasant situation. They are mostly in their 40s and 50s with various financial obligations (mortgages, kids, etc) and they are unlikely to find a new niche for themselves readily, at least not without taking a major pay cut.

Some of them are very materialistic and insist on living it up to the max. Others might be more frugal if it weren't for their spouses who are hell bent on keeping all of their credit cards maxed. Yet another type, which I find particularly frustrating, have 0 willpower and always choose the path of least resistance. They simply can't say 'no' to their families (even exes!), impulses or whatever else may have claims on their wallets.

It's quite sad, really. I have known them for years and many of them are decent folks. They have been vaguely aware of the gravy train coming to an end for some time now, but for the most part they refuse to do anything about it. Some of them occasionally make plans to come up with a budget or "have a talk with my wife" or re-evaluate their priorities, but somehow it never comes to anything. Others are actively fighting with their spouses over money, but I am yet to see a single unambiguous win. Not counting divorces, that is...
__________________
Scrooge is offline   Reply With Quote
Re: Got some free time? Help me build a budget for
Old 08-27-2006, 04:32 PM   #67
Full time employment: Posting here.
Helena's Avatar
 
Join Date: Aug 2006
Posts: 601
Re: Got some free time? Help me build a budget for

Quote:
Originally Posted by jclarksnakes

A little house with a stay at home mom or dad
is likely to provide a much happier childhood
than childcare and a Mcmansion.


For a healthy happy 3 year old, Mommie at home is essential !


Unfortunately, children are routinely sacrificed on the altar of
American consumerism.







__________________
Helena is offline   Reply With Quote
Re: Got some free time? Help me build a budget for
Old 08-27-2006, 07:30 PM   #68
Full time employment: Posting here.
 
Join Date: Mar 2005
Posts: 699
Re: Got some free time? Help me build a budget for

Just for yucks, thought I would try this for my area.

Quote:
Originally Posted by Sam
a young family of three. H, W, and 3 years old kid.
H & W about 30 years old, both working.
Gross annual income: 130K
Call that 100k after income (national, local), social security, and national health insurance taxes.

Net: 8333/mo.

Quote:
Saving: 50K
401K: 50K
Debt: 30K student loan.
Cars loan: 2 cars, current monthly payment: $550 for another 4 years.
Would like to buy a house for 390K. Current interest rate, 30 years fixed: 6.5%
30 year fixed is 3.25%. If they finance 100%, this comes to 1700/month.

Quote:
Can you come up with a workable budget for this family? Real number please! Assume this family will be your new neighbor, so same tax rate for income, property...

Housing: P&I, Insurance, Tax, Utilities, Maintenance...
Transportation: Car payment, insurance, gas, maint....
Heath:
Food & clothing:
Child care:
Entertainment:
401K saving:
Misc:

Why? I have tried so many times, and I failed each and every time.

Edit: Added car payments.
Say property taxes are 125/month, disaster/earthquake insurance 50/month.

Utilities: 400/mo

Car insurance: 100/mo
Gas: 200/mo
Car registration & inspection fees: 1200/year, 100/month
Road taxes: 850/year, 70/month
Car maintenance: 50/mo

Child care: 500/mo (all-day nursery school)

Total monthly expenses so far:

550 Car loans
520 Car other
1700 House loan
125 Property taxes
50 Property insurance
400 Utils
------
3345 Sub-total

From 8333/mo net income, this leaves ~5000/month for food, clothing, entertainment, house maintenance, retirement savings, car savings so that the next vehicles can be bought without a loan...

Hmm, looks pretty doable. Even if mortgage rates went up to the 6.5% posited, that would only add 765/month in expenses.
__________________
bpp is offline   Reply With Quote
Re: Got some free time? Help me build a budget for
Old 08-27-2006, 10:45 PM   #69
Full time employment: Posting here.
 
Join Date: Mar 2005
Posts: 699
Re: Got some free time? Help me build a budget for

I forgot the student loan. 300/month?
Also forgot to put the child care (500/mo) in the summation. Oops.

Try again, with more details:

Net: 8333/mo.

Monthly expenses:

550 Car loans
520 Car other
1700 House loan
125 Property taxes
50 Property insurance
400 Utils
300 Student loans
500 Child care (nursery school)
1000 Food, clothing & entertainment
2000 Retirement/college savings
300 New car fund
400 House maintenance
------
7845

Which leaves 500/month for emergency fund, extra retirement savings, the occasional trip, etc. If the mortgage rate is 6.5%, they might instead have to cut back on their retirement savings a bit. But note that the car loans will be retired in 4 years, and presumably they won't ever need one again after that. Also, once the kid turns 4, the nursery school fee drops by a couple hundred per month.

Looks pretty good to me. My only question is, why is this couple looking to buy a house without having any downpayment ready? (I wouldn't touch the 50k cash they have now, keeping it as emergency fund instead.) But if they want to do it, it looks pretty doable to me.

__________________
bpp is offline   Reply With Quote
Re: Got some free time? Help me build a budget for
Old 08-28-2006, 09:58 AM   #70
Recycles dryer sheets
 
Join Date: Nov 2004
Posts: 117
Re: Got some free time? Help me build a budget for

Quote:
Originally Posted by Nords
...If those companies made a fuel-efficient station wagon that could haul a 4'x8' sheet of building material, or a dishwasher or a washing machine, then I'd be more interested.* When I rent a U-Haul for larger loads I'm usually paying $75-$100 for the experience.* Maybe next time around we'll look at a Civic or Camry station wagon, but people seem to hang on to them forever.
Buy a 4x8 trailer and a hitch for the Camry. This kind folds up for when you need to store it:

http://www.harborfreight.com/cpi/cta...emnumber=90154

1100 lbs payload. Easier to load than a pickup.
__________________
slepyhed is offline   Reply With Quote
Re: Got some free time? Help me build a budget for
Old 08-28-2006, 10:17 AM   #71
Thinks s/he gets paid by the post
 
Join Date: Mar 2006
Location: Houston
Posts: 2,155
Re: Got some free time? Help me build a budget for

Quote:
Originally Posted by bpp
My only question is, why is this couple looking to buy a house without having any downpayment ready?* (I wouldn't touch the 50k cash they have now, keeping it as emergency fund instead.)*
This is a young couple. 50K saving and 50K in 401K at age 30 is quite an accomplisment in my view.
__________________
Sam is offline   Reply With Quote
Re: Got some free time? Help me build a budget for
Old 08-28-2006, 10:20 AM   #72
Thinks s/he gets paid by the post
 
Join Date: Mar 2006
Location: Houston
Posts: 2,155
Re: Got some free time? Help me build a budget for

Thank you all for participating.* I think I've seen all the different views on this 3x rules.
__________________

__________________
Sam is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Did you find that the endless free time wasn't really that way? Surfdaddy Life after FIRE 26 05-16-2007 12:27 AM
Another ER candidate gets it, and this time she really means it! Nords Other topics 19 06-27-2006 10:54 AM
Time to quit? quiz sgeeeee Young Dreamers 20 10-24-2005 11:50 PM
Almost free tax software, etc. cute fuzzy bunny Other topics 3 01-11-2005 09:07 AM

 

 
All times are GMT -6. The time now is 11:22 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.